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Why petrol cars may win race against diesel vehicles

by ET Posted on 07 Jan 201348,250 Views4 Comments

With diesel prices likely to go north coupled with higher price tags of diesel vehicles the market may tip in favour of petrol cars

 

 

 

When did the switch happen?

 

The share of petrol cars, which constituted 81% of the overall market in FY08, has been slipping consistently year-on-year due to the introduction of quality diesel hatchbacks and sedans in the market.

 

The drop, however, has been dramatic in the past couple of years, with petrol prices getting deregulated and diesel prices still controlled. The price gap between petrol and diesel fuel which was around Rs 9.80 in May 2010 widened to Rs 25 in a short span of a year. This resulted in a major shift in demand for diesel cars.

 

The share of petrol cars, which stood at 75% in FY10, slipped to 69% in FY11 and further to 58% at the end of FY12. It went further down to 47% in July 2012 before it gradually recovered. The share of cars has seen a gradual increase month-on-month to 54% by October of 2012, before closing out the month of November at 53%.

 

After a knee-jerk reaction from many customers towards diesel cars, many automotive companies imparted intensive training to their sales personnel and dealers. Carmakers such as Maruti Suzuki, Hyundai India and Toyota Kirloskar developed tools to define the cost of ownership at the dealership.

 

Toyota Kirloskar even reached out to professionals like teachers, doctors, lawyers and employees of the PSU sector who by virtue of their vocation need not travel a lot and, hence, are not likely to run their vehicles beyond 1,500 kms a month. However, if the usage is higher than that, despite the diesel price increase, the diesel cars will still be more economical.

 

With a proposed increase in diesel prices, a return to petrol cars is a given, say experts. Already, Toyota Kirloskar has seen a 5% shift towards petrol cars post the diesel hike and ditto is the case for General Motors. The Chevrolet Beat petrol contributed 15% of the overall model's sales before September. As on December it contributed 20%.

 

Sandeep Singh, DMD & COO (sales, marketing, customer service and commercial divisions) Toyota Kirloskar says the industry has seen a shift in demand from diesel to petrol cars in the entry level segment after the diesel price hike in September.

 

"An array of factors are responsible: The customer's realisation of the advantages of owning a petrol car over a diesel one, the government's prior announcement of its plans to increase diesel prices and, finally, carmakers like Toyota, who have maintained a steady price gap between their petrol and diesel vehicles."

 

Singh expects the petrol contribution in Etios Reva and Corolla Altis to move up to 25% in the next quarter and the company is already planning its production accordingly.

 

Hyundai India, which saw its petrol car share fall to 64% in June, has seen a revival in demand for petrol cars, with 82% of its overall sales coming from them. However, Maruti Suzuki's petrol car sales remained at 60% for the most part of the year due to a diesel engine capacity constraint.

 

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